The NBA Team Building A Multi-Million-Dollar City Around Its Arena

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Hey Friends,

An ownership group that includes investors Marc Lasry, Wes Edens, and Jamie Dinan purchased the Milwaukee Bucks in 2014 for $550 million. But just eight years later, the team is estimated to be worth more than $1.85 billion, according to Sportico.

Compounded Annual Growth Rate (2014-2022)

• Milwaukee Bucks: +16%

• S&P 500: +9%

There are several reasons for that financial outperformance. The Bucks built a new $524 million arena that included $250 million in public funding. They drafted Giannis Antetokounmpo and won an NBA championship in 2021. And they have quietly become one of the most profitable NBA franchises virtually overnight.

Here are some pre-pandemic numbers to illustrate my point:

Milwaukee Bucks Avg. Home Attendance:

• 2013: 13,487

• 2019: 17,602

Milwaukee Bucks Revenue

• 2010-11: $92 million

• 2011-12: $87 million

• 2012-13: $109 million

• 2013-14: $110 million

• 2014-15: $126 million

• 2015-16: $146 million

• 2016-17: $179 million

• 2017-18: $204 million

• 2018-19: $283 million

Milwaukee Bucks Operating Income

Of course, some of this financial outperformance is due to the NBA’s overall growth as a league — the average NBA team has appreciated about 330% since 2013. Still, the Milwaukee Bucks have outperformed them also, up 500% during the same period.

2013-2021 NBA Valuation Gain

• Avg. NBA Team: +330%

• Milwaukee Bucks: +500%

That’s because—similar to other top-tier sports franchises that are owned by operators with Wall Street investment backgrounds—the Milwaukee Bucks haven’t just sat back and simply caught the rising tide that is league-wide media rights.

They have done things differently. And nothing illustrates this more than the Deer District, a 30-acre property surrounding their home arena, the Fiserv Forum.

The concept behind the Deer District is pretty simple. It’s essentially a small city located around the arena. There are restaurants, bars, and shops. And they are adding a luxury apartment building, a gym, a supermarket, and even a Marriot hotel.

But the Bucks are now officially shopping the naming rights, recently announcing they are looking to close a 10-year deal worth $30 to $40 million ($3M-$4M annually).

That feels like a pretty fair price given the comps. But I have no idea where this deal will ultimately end up. Instead, I think the exciting part is how the Bucks are leveraging their brand to build additional revenue streams outside of basketball.

This isn’t necessarily a new playbook. The Dallas Cowboys have The Star. The St. Louis Cardinals have Ballpark Village. The Atlanta Braves have The Battery, and many other teams own significant real estate around their arena, ballpark, or stadium.

But this speaks to the ongoing dilemma facing sports organizations globally. The same revenue streams have been in place for decades—TV rights, ticket sales, merchandise, concessions, etc.—and now these individual teams are being forced to develop entirely new categories that produce a meaningful amount of cash annually.

That’s not necessarily an easy task. But teams like the Dallas Cowboys and the Golden State Warriors are writing the playbook in real-time. They use their franchise as a centerpiece and leverage that brand and community to launch ancillary (but related) products and services that fortify their balance sheet and strengthen their offering.

This is why crypto has infiltrated professional sports so quickly — sports teams didn’t have an official crypto partner before, and it allowed them to create an entirely new revenue stream that was additive to their existing sponsorship inventory. That made it a no-brainer, and my guess is that this is just the beginning.

Professional sports teams are no longer a pet project for rich people to brag about to their friends. Ok, maybe there is still some of that! But more so, these have become large businesses worth billions of dollars.

They require 24/7 management, planning, and operational excellence if you want to win. And I think that will lead to a world where these teams look more like tech startups and less like sports franchises in the future. So that will be an exciting time.

I hope everyone has a great day. I’ll talk to you tomorrow.

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The Joe Pomp Show: Today’s episode breaks down two of the most interesting topics in sports business today — why Netflix should add live sports to its offering after watching its stock drop 70% this year alone and how Liberty Media turned a $4.4 billion purchase of Formula 1 into an American phenomenon. Enjoy!

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The Best Business Deal In Sports History: My favorite sports business story involves two brothers turning $1 million into $800 million as basketball team owners without ever owning an NBA team. It's a masterclass in leverage, long-term thinking, and the power of equity & ownership. So watch, subscribe, share, and enjoy!

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